Supervalu increases debt reduction target to $600 million for fiscal 2010

By Jennifer Lanning Drey

Portland, Ore., Jan. 7 - Supervalu Inc. remains on track to meet its debt reduction target of $400 million in fiscal 2009 and has increased its target for debt repayment for fiscal 2010 to $600 million, Jeff Noddle, chief executive officer of Supervalu, said Wednesday during the company's earnings call for the third quarter of fiscal 2009.

"This simply provides additional financial flexibility given these uncertain capital markets," Noddle said.

Supervalu plans to achieve the additional debt reduction in 2010 primarily through reducing capital spending by opening fewer new stores, initiating fewer major store remodel projects and reducing investments in technology as system migration efforts are completed.

The company expects to end fiscal 2009 with about $1.5 billion available under its revolving credit facility.

Combined with cash flows, the company believes it will have sufficient liquidity to service $2 billion of debt it has maturing through February 2011, Pamela Knous, chief financial officer of Supervalu, said during the call.

Year-to-date net cash flow from operating activities was $1.1 billion, compared to $1.0 billion in the prior year.

However, the company plans to look to the credit markets prior to using the revolver to meet debt obligations.

"While our revolving credit facility is an available option for refinancing debt maturities, we are ready, willing and able to enter the credit markets when acceptable terms and pricing are available," Knous said.

Total debt hits $8.9 billion

Supervalu ended the third quarter of fiscal 2009 with total debt, including capital leases, of $8.9 billion, which reflected peak seasonal borrowings.

Debt reduction since the end of the quarter and through Jan. 6 was $222 million, Knous said.

"Let me assure you that debt reduction is a priority, and we are committed to reducing our borrowing levels by at least $400 million this fiscal year," she said.

Supervalu's other priorities for cash flow include investing in stores and paying dividends, Noddle said.

Supervalu posted third-quarter net sales of $10.2 billion and a net loss of $2.9 billion. The figures compare to net sales of $10.2 billion and net earnings of $141 million in the third quarter of fiscal 2008.

The third-quarter fiscal 2009 results included a non-cash goodwill and intangible asset impairment charge of $3.3 billion, while the fiscal 2008 third-quarter results included after-tax one-time acquisition-related costs of $7 million.

Supervalu is a supermarket operator based in Eden Prairie, Minn.

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